We recently published a list of 12 Most Undervalued Large Cap Stocks to Buy Now. In this article, we are going to take a look at where Verizon Communications Inc. (NYSE:VZ) stands against other most undervalued large cap stocks to buy now.

On March 4, David Katz, Chief Investment Officer at Matrix Asset Advisors, joined ‘The Exchange’ on CNBC to share his perspective on the current state of the bull market and what February’s mixed action and sector rotation might signal for the rest of the year. Katz acknowledged that while people might not want to hear it, the volatility seen in February is likely to persist throughout the year, with both upside and downside movements. He emphasized that this creates opportunities for investors but also necessitates caution. Katz highlighted several positive factors supporting the market, which included a strong economy and solid corporate performance. However, he expressed concerns about certain policies from the administration, such as tariffs, immigration, and the relationship with the Fed. While these issues have been largely ignored by the market so far, Katz warned that they could eventually lead to a 3-5% correction. Despite this, he remained optimistic about the economy’s ability to navigate these challenges and recommended buying into market dips rather than chasing rallies.

To support his sentiment, Katz pointed to companies that have already experienced significant corrections and are positioned to perform well regardless of broader market movements. He highlighted their strong fundamentals, attractive valuations (most trading at under 13-14 times earnings), and good outlooks. He also noted that last year’s market leaders have slowed significantly, while sectors that underperformed are beginning to show meaningful improvement, a trend he expects to continue. This sector rotation suggests that investors should be prepared to adapt their strategies as different sectors gain momentum throughout the year.

Methodology

We used the Finviz stock screener to compile a list of the top stocks trading between $10 billion and $200 billion. We then selected stocks with a forward P/E ratio under 15 and made a list of 12 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q4 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

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Verizon Communications Inc. (NYSE:VZ)

Forward Price-to-Earnings Ratio as of March 4: 9.23

Number of Hedge Fund Holders: 74

Verizon Communications Inc. (NYSE:VZ) is a global telecommunications leader that offers an array of communication, technology, information, and entertainment services. Through its Consumer and Business segments, it provides wireless and wireline services. These include mobile, broadband, fiber-optic connectivity, and enterprise solutions. It caters to individuals, businesses, and government entities.

The company is currently focused on its “AI Connect” initiative. It provides the infrastructure and connectivity solutions needed for businesses to deploy and utilize AI workloads. The company is pursuing it to capitalize on the growing AI infrastructure market, which is projected to see over $1 trillion in investments in the next decade. The initiative uses the company’s existing fiber network and edge computing capabilities. It already has a $1 billion deal funnel as of Q4 2024, with major players like Google and Meta using Verizon Communications Inc.’s (NYSE:VZ) network for AI workloads.

On January 27, Bernstein analysts decreased their price target for Verizon Communications Inc. (NYSE:VZ) from $48 to $46, while reaffirming a Market Perform rating. This adjustment came despite recognizing the company’s strong 2024 performance, which was characterized by growth in postpaid and fixed wireless access (FWA) subscribers, particularly in Q4 2024. It made an overall revenue of $35.68 billion in Q4, which represented a 1.57% year-over-year improvement.

Third Point Management sees Verizon Communications Inc.’s (NYSE:VZ) acquisition of Frontier Communications as a strategic move that validates the value of high-end fiber networks and positively impacts the telecom sector. It stated the following in its Q3 2024 investor letter:

“While some economic activity has been showing signs of slowing, the defensive composition of the current high yield market with a high mix of higher quality credit and short duration has let the rates tailwind overwhelm such concerns. The lowest quality sectors of the market have performed best, fueled by both soft/no landing expectations, as well as two positive events in the beleaguered telecom space. Telecom/cable have been poor performers year to date due to overhang from the growth of FWA (aka “wireless cable”) and increased fiber building, however the sector re-rated materially on two deals. Second, Verizon Communications Inc. (NYSE:VZ) announced a deal to acquire Frontier Communications (FYBR), a transaction which the fund benefited from by virtue of its investment in FYBR debt. This transaction, aimed at increasing’s VZ fiber footprint, has led to broad revaluation of fiber retail networks that we think is appropriate. While we continue to expect to see FWA rapidly erode non-upgraded cable and especially copper’s share of the low-end broadband market, the VZ deal underscores the value of the higher end footprint.”

Overall, VZ ranks 10th on our list of most undervalued large cap stocks to buy now. While we acknowledge the growth potential of VZ as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than VZ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires

Disclosure: None. This article is originally published at Insider Monkey.